Posted
by
ScuttleMonkey
on Monday November 10, 2008 @06:06PM
from the petty-jealousy dept.

tom_guyette writes "ComputerWorld reports a federal judge has ordered former IBM executive Mark Papermaster, recently hired as Apple's vice president of hardware devices engineering, to stop working for Apple. The judge's ruling is based on a motion for preliminary injunction made by IBM, which states Papermaster's new job violates a non-compete agreement he signed in 2006. In response, Papermaster asserted to the court that 'Nothing about his new job will implicate any trade secrets from IBM.'"

I could've sworn the matter hasn't actually been decided by a court. From wikipedia:

"The preeminent court decision discussing the conflict between California law and the laws of other states is Application Group, Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881 (1998). In Hunter, a Maryland company required that its Maryland based employee agree to a one-year non-compete agreement. The contract stated that it was governed by and to be construed according to Maryland law. A Maryland employee then left to work for a competitor in California. When the new California employer sued in California state court to invalidate the covenant not to compete, the California court agreed and ruled that the non-compete provision was invalid and not enforceable in California. Business and Professions Code Section 16600 reflects a "strong public policy of the State of California" and the state has a strong interest in applying its law and protecting its businesses so that they can hire the employees of their choosing. California law is thus applicable to non-California employees seeking employment in California.

Whether California courts are required by the full faith and credit clause of the United States Constitution to enforce equitable judgments from courts of other states, having personal jurisdiction over the defendant, that enjoin competition or are contrary to important public interests in California is an issue that has not yet been decided."

"...the full faith and credit clause does not require one state to substitute for its own statute, applicable to persons and events within it, the conflicting statute of another state, even though that statute is of controlling force in the courts of the state of its enactment with respect to the same persons and events"

Reading your sig, all I can think of is that old disturbing Flash fanimutation, Hyakugojuuichi! [google.com] If your "juiche" is from that, then it means "11" (eleven) in Japanese.:)

The original song in the Flash video is a children's song from Japan that talks about having 111 friends, with the chorus something like "tomodachi ga hyakugojuuichi" ('friends [subj marker] 111' = 'I've got 111 friends'). The PeeWee-Herman-on-crack video version is much funnier, but I refus

Actually, CA courts ruled that the state has an interest in protecting business interests within the state. If my understanding of the Wikipedia summary of non-compete clauses [wikipedia.org] is correct, being that the individual in question, as well as his destination is in CA, CA court could claim jurisdiction.

U.S. Constitution Article I, Section 10, Paragraph 1 states No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any

Your post is silly. Companies require these non-comp agreements even where they are not enforceable so that they can bully their employees when they leave, if they leave for a competitive company. Without unionizing everything, few individuals will have the leverage to simply walk away from every company that requires a non-comp, and if they ever have to fight, it'll be expensive even if the law is on their side.

So in this case, who is lying? The person who signs an unenforceable document because it's a formality which is required in order to get hired, or the company which requires it and can only use it for intimidation because they know if their employee had the resources to fight it, they would lose?

Couple of things I've learned recently: Lawyers, apparently, never sign these things, but they're kind of special because a good lawyer can just hang out their shingle. Also, in the UK, it's common practice in the financial industry for the hiring company to pay a year's salary or more for someone they are poaching from a competitor to take a nice vacation, so they can come back outside of their non-comp boundaries.

The latter (UK financial) happened to a cousin of mine. The former I learned from my wife, who recently left the DOJ and was heavily courted by an HR consulting company. They practically begged for her to join, but they could not guarantee a minimum amount of consulting work, and also required a non-comp. Her reaction? "I believe slavery is still illegal in the US." No go.

I did not sign a non compete and I kept working for the company for over a year. If they want a non compete say fine I want 50% over the average for my position. Company's only have the power people give them by blindly taking their crap.

This is not a lowly employee for them to bully around. This is an executive vice president. Did you not read the article? These are the kind of people who could easily say "Strike that from my contract or no deal, and I'll work somewhere else"

I don't know him personally, and I'm sure he's a fine individual; but that said, I don't think he'll be in a pinch for money anytime soon. If this causes reform that affects normal people like you and me great. But otherwise I could careless, he should suffer the same fate we would. The difference is that if you or I left or get laid off a. we don't have a crazy pension that he likely does. b. we don't have companies happy to pay 6+ figures a year for us to do nothing.

The person is lying, no one forces you to sign anything. Employment is at will, if you don't like it negotiate it or don't sign it. That's how the legal system works. I can't sign a loan for a million dollars and then say you didnt really think I was going to pay you back did I?

Hopefully this will get the contracts and the laws regarding them updated and inspected. Much like the copyright issues with music, instead of breaking the laws and skirting them lets CHANGE them.

I can't sign a loan for a million dollars and then say you didnt really think I was going to pay you back did I?

But if you're a "too-large-to-fail" insurance company, and it's $123 billion, it's A-OK.:-(

More to your actual point though, you are assuming that employment is a perfectly competitive market, which it is not. There is potential for huge information asymetry (both ways), unequal bargaining power, high search and switching costs, and so on.

Once you're at that level, there are fewer positions available, and if there's collusion such that no companies hire without a NC agreement, then you are either forced to sign, or you're flipping burgers.

Your loan example is apples to my oranges. A loan is a material exchange. A closer example would be if you made a loan to me at a rate that is outside of the bounds allowed by usury laws. I might sign it not knowing what the laws are, or because I'm desperate for the money, but if I learn that I'm being taken advantage of, I may well tell you I will not pay you more than the legal limit on interest over the principal, and I may sue you for punitive damages for the high payments you've required of me thus far.

Sometimes unjust laws have to be challenged by breaking them. Without Rosa Parks, our next president might have spent hhttp://slashdot.org/comments.pl?sid=1024461&cid=25714231#is childhood sitting at the back of the bus.

"The person is lying, no one forces you to sign anything. Employment is at will, if you don't like it negotiate it or don't sign it."

From personal experience, the situation is often more complex than this. In my previous job the company was growing quickly and HR was not in place to cope. One year later a new head of HR reviewed everyone's file and required some employees to sign a new non-complete. At that point it would have been *very* hard for me to go back to freelancing and build up my old client base. I was also in management so refusing would have been awkward to say the least.

Two years go by and I was taking a job at another company working for one of my previous employer's clients. In my city about 50% of companies in the industry work for this client. I didn't maintain any key relationships nor was I stealing any secrets but I got slapped with the non-complete. Lucky for me, the new employer stuck their best lawyers on it to review the merits of the case and sided with me.

It's very hard to get out of signing a non-complete, or altering it, unless you have a strong position of negotiation (read: they need you more than you need them). Imagine you've accepted a job, told your employer, and then you learn you need to sign one. Imaging you have a job and are asked to after a period of employment. Imagine you're trying to break into the industry, or got laid off, and this is your first job offer in four months.

It's not so cut and dry-- I wish our government would do more to protect Joe the Developer's rights to "live liberty and the pursuit of happiness". I also take offense that you think someone who's a EVP, or pulls six figures, could be significantly hurt monetarily but this. Do you know for a fact that Apple is paying his legal bills? It's the individual getting sued in most cases and the result could seriously devastate his professional career.

If it's that big of a deal to you then don't sign it. I've known several programmers that confronted management about the non-compete and didn't have to sign.

However, non-competes make a ton of sense, at least the narrower ones which specify that you can't go to a company in direct competition with your current one. For tech jobs, knowledge is everything, and knowledge doesn't just disappear overnight. If a senior programmer where I currently work were to jump to a competitor, it would be worth millions

If it's that big of a deal to you then don't sign it. I've known several programmers that confronted management about the non-compete and didn't have to sign.

However, non-competes make a ton of sense, at least the narrower ones which specify that you can't go to a company in direct competition with your current one. For tech jobs, knowledge is everything, and knowledge doesn't just disappear overnight. If a senior programmer where I currently work were to jump to a competitor, it would be worth millions of dollars if they could pick his brain about techniques, abilities, and which customers were dissatisfied.

So you're saying that a person cannot go to a higher bidder if demand/pay for their services is higher than what they are currently being offered?

Competition and capitalism are antithetical. As soon as any corporation achieves an absolute advantage over any other corporation for the same product, they can sculpt the market to look however they want. Likewise when employers all enter into a tacit cartel by all requiring the same non-compete agreements--essentially taking monopoly power over all hiring in a particular industry. Add the fact that such contracts are supposedly enforced by the government and you are essentially giving autocrat

If a person moves to a different state can the state they left behind still enforce their laws on that person? Can the state of New York force the state of California to enforce actions that are illegal in the state of California?

Maybe that was rhetorical, but yes; well, the things agreed to in that state, at least. Contractual obligations transcend state lines according to the constitution [usconstitution.net] (for what it's worth).

And about the promises.. I'm all for people upholding their promises. We could definitely use more of that.:)

However, I feel like this is thought-crime territory. The whole purpose of the non-compete is to stop you from divulging company secrets - But the method which they employ makes you promise not to work for anoth

Not if they want to work for me. If you don't like non-competes, don't work somewhere that requires you to sign one. Capitalism is about making trade-offs.

Capitalism is about competition. Non-compete clauses are the very opposite of competition. If you don't want your employees to work elsewhere, maybe you should pay them more? Or suck it up and accept that you're going to have to compete against him at some point in the future.

You have no right, no right, over the lives of your employees. That's another thing about Capitalism--it's supposed to be about freedom.

If it's that big of a deal to you then don't sign it. I've known several programmers that confronted management about the non-compete and didn't have to sign.
However, non-competes make a ton of sense FOR THE EMPLOYER, at least the narrower ones which specify that you can't go to a company in direct competition with your current one. For tech jobs, knowledge is everything, and knowledge doesn't just disappear overnight. If a senior programmer where I currently work were to jump to a competitor, it would be worth millions of dollars if they could pick his brain about techniques, abilities, and which customers were dissatisfied.

There, fixed that for you. If the employee is worth that much, employers should treat them well, compensate them appropriately and make them feel appreciated. There are already laws about trade secrets; a non-compete agreement is just a control mechanism which, when enforceable, gives great leverage to the employer and none to the employee.

In an economic depression like ours they can do it and you are screwed if you refuse to sign it. Someone else will and your family will starve if your out of work.

As more companies do this sort of thing the problem will continue when it improves. Pretty soon you wont have a choice and its kind of like minimal wage. Employers pay it because you have no choice but to take it with your education level and the large pool of applicants for the job.

How experienced are you? I know I can not get away without signing one.

...Given the high pay and pleasant working conditions around here, they obviously want to keep us here....

Apparently IBM did want to keep the guy and offered him full pay for the duration of the noncompete agreement. In effect, they were offering him a paid vacation, so it would have been no financial hardship to keep his promise.

Keeping promises is apparently not nearly as important to people anymore, as it used to be in bygone days. Solemn promises made on wedding days are broken more often than kept nowa

The problem is a non-compete effectively makes you worthless if you leave your job. What's the point in being a pro if you can't legally sell your skills to the highest bidder ?

Even if a pro jumps ship over to your competitor, all that knowledge is worth very little unless they can put it to work against you within a short time frame. That same knowledge could have been used by YOU, to fix what's wrong with YOUR company. If the clients find a better deal elsewhere, it is not because "the employee knew to

My gut reaction is to say some glib remark about "free" as in "freedom" regarding his job selection.

However, I quickly realized that he did exercise his freedom, but in another sense. He used his freedom to form a binding contract with his previous employer. Now he's being held to that agreement for better or for worse.

There are a class of rights that you can not give up. Even if you try to sign them away in a contract, you still have them, and the courts will find the contract unenforceable.

So, just because he signed it doesn't mean he has to abide by it...especially since most companies require the signing of such contracts these days....it is not like you can refuse to sign and just go work for someone else, the "someone else" will also require you to sign.

On the other hand, I could argue that non-competes are unconstitutional and void since 'life, liberty and the pursuit of happiness' are _unalienable_ rights.

You can't give away your right to earn a living as a law-abiding citizen anymore that you can sign a contract that has a section that says you'll be executed by a firing squad if you breach one or another clause.

....it's the one it is presented to who has the freedom to tell the company to go fuck themselves....

That might work if there were only one or two companies in a given field that made these noncompete agreements as a condition of employment. As soon as most them or all of them make this as part of their standard employment practice, such a stance on part of the employee is no longer practical. When that happens, society must step in and outlaw such agreements completely or make it unpalatable for employers

So what, the guy cant work in his professional field anymore? I get that you want to protect your IP, but not at the cost of a very highly qualified individual's livelyhood. If Nvidia makes an infringeing part, you sue them, but you dont stop people from taking jobs. Chilling effect indeed! I have friends that would think twice about working for Big Blue now. Makes me nervous of the thought of signing your brain over to a corporation.

So what, the guy cant work in his professional field anymore? I get that you want to protect your IP, but not at the cost of a very highly qualified individual's livelyhood.

I am sure a guy with his qualifications understood completely that he signed a non-compete with IBM to advance his livelihood as an employee of IBM.

I have friends that would think twice about working for Big Blue now. Makes me nervous of the thought of signing your brain over to a corporation.

An entirely understandable, reasonable response to this. I wouldn't sign with them either (unless I desperately needed the work or they waved obscene money at me or gave me some other reason to sell my soul).

It doesn't say he can't work, but it certainly makes me wonder if the goal of the non-compete clause was to protect trade secrets, or just to get to pick who he gets to work for if he leaves... Quite a few companies seem to think the latter... I can't wait to see them disabused, but I'm not holding my breath. If the trade secret, and not the contract, was the meat of the issue, the audience would show it neh?

This is standard corporate procedure. You work with a company, they reveal trade secrets, you sign a clause saying that you won't work in the same industry or with a direct competitor for a year.
This guy was treated more than fairly. They didn't kick him to the curb, they offered him a years paid salary to sit out, and he still left the company. When you take into consideration that Apple recently dumped IBM's processors, and some lingering animosity from that, it's no wonder why IBM is being aggressive in it's approach.
While I'm no fan of corporate overlords, you don't just let some high level shirt walk off with all of the trade information about your current and future plans to a competitor and sit idly by. This guy knew exactly what he was doing and decided to roll the dice.

Or you walk into the contract negotiations with a red pen and cross out the 12 month extension beyond employment termination.

The problem with non-competes is that they are so vaguely written that it can cover pretty much any new job in the field you're trained for. Sure, you can bring it to litigation to prove otherwise, but what employer would be willing to risk taking a new employee that might have a possible contractual obligation?

actually your post just goes to the argument that this should be thrown out. Where's are the two compaines competing that is causing this friction? If a guy can't walk out of IBM a massive chip and mainframe company and into apple, a front end MP3 player, computer maker, and computer maker without some conflict then the idea of his non-compete is too broad.

IBM and Apple don't compete any more than a any other two massive tech companies and less than most. These two companies are about as far apart as you

so if it's decided at the end of the trial that the non-compete didn't apply and he was free to work for Apple, who compensates him for the lost earning whilst the temporary injunction was in place? What about secondary losses? Loss to Apple?

He went to work in California. The question is whether a contract signed in New York is enforceable in California, and that's not a clear-cut case. There are two competing cases referenced above about this very thing.

His problem is that IBM filed the federal lawsuit in New York. Following the Erie doctrine, that state's laws will be used to determine the outcome. If he had sued first, in California, he would've been on much more solid legal ground.

In general it is a clear-cut case -- contracts signed in other states *are* enforceable. And that's probably the case here too.

But CA law may grant him relief against certain aspects of the agreement -- specifically he may still be able to work for Apple, even if the contract is generally valid, because that particular method of enforcement is not allowed in CA.

According to the non-compete agreement, NY law applies because IBM is based in NY. However Papermaster worked out of their Austin, TX offices where non-competes are not enforceable. One thing I think that Apple would argue is whether Papermaster is competing at all in his current job. Most non-competes only cover areas of work that are in direct competition. A former GE Energy executive taking a job at Exxon may have an issue. A GE Plastics executive may not have any issues. Right now I've heard two versions of the work Apple hired him. One version says the Papermaster will work as head of their iPod/iPhone line (which does not compete directly with IBM's blade server or chip technology). Another version has him head of the new chip design for iPod/iPhones which is more direct competition.

And here is the hypocrisy. Texas is a right to work state, which means that it is illegal to set up impediments that prevent a person from working. While this is narrowly interpreted, and largely intended, to prevent the workers in a free market from engaging in the same type of activities that employers do to keep profits at a reasonable level, there is no reasonable cause for such interpretation. Right to work should be right to work. No one, not the union, not the corporation, not the government, sho

Unless Papermaster has assets or other property interests in the State of New York or is a resident of that state then he could probably just ignore the orders of the NY court since this is not a criminal matter, but an issue of differing state contract laws (IANAL). Apple, on the other hand, has a very nice store in downtown Manhattan and probably has other business and financial interests in New York as well (NYSE for example). I am not sure what the repercussions of that might be, but it probably is impo

Ummm... non-compete agreements are perfectly enforceable in Texas [smith-robertson.com] so long as certain requirements are met (agreed-upon timeframe, agreed-upon geographical location, agreed-upon activities). There's some degree of latitude in what those requirements are, depending on the type of job the non-compete is attached to -- I've had lawyers confirm that "worldwide" is likely sufficient qualification to meet the "geographical location" criteria in certain circumstances.

And that's ignoring that, with sufficient compensation, the "at-will" nature of employment can actually be transcended. In layman's terms, if they pay you enough, then you can agree to almost anything, and it will be legally binding. It's guaranteed not to be an issue for most people, but it can make a difference once you're playing at the "executive in a large company" level.

Vauge crap such as "Upon your termination, willingly or not, with this company, you may not work for any of our competitors for one year," would not hold up in court. Specific competitors, certain geographical locations, etc. MUST be clearly laid out.

A non-compete seems to me the perfect way to pay your best employees peanuts. If you sign a non-compete, then you're basically trapped at one company, and can never get a job in the same industry again. Using that information, your employer could pay you as little as they want and never fear you leaving for another company.

You're right. IAAL and non-competes, to be enforceable, must be reasonable under the circumstances as to both duration and geographical area. Of course, in this case there will be an issue of fact (namely whether his specific duties are likely to result in transfer of secrets), normally resolved by a jury, but in this case due to the irreparable harm of excluding him from employment for a year, more likely to be decided by a judge on briefed motions.

Some really do last a lifetime, I have a non-compete agreement in my secret 3 letter agency clause that says: "We, as in a bunch of guys with guns and the keys to all the jails and stuff, will come get you no matter where you are in the world if you don't keep your mouth shut about our government secrets until you die. If you work for someone else in the trade we might even hang you until you are dead, then put you in jail for 322 years just to make sure"

Sign the delta brief and you've signed on for life.

My choices were quite limited after resigning. People don't want to employ former spies. The best I could manage were a few low paying industrial espionage gigs. So I put ~disgruntled former spy~ in the resume and my troubles went away overnight.

Sure it would be nice if such non-compete agreements could not be implemented. From what I have seen in the past it was unusual that an employer would get themselves into this situation in the first place - if a possible non-compete problem existed they just didn't bother with that applicant.

Once you start opening the door to such things, it is very difficult to just sue the company. What the non-complete may be relevent for may be something that is buried deep in the processes of the company and not at all apparent in the resulting product. And besides, that just opens the door to exploratory lawsuits because the person that got hired might be disclosing information they have no right to disclose.

This isn't just "personal knowledge" either. It is often "organization knowledge" that you have to know about in order to do your job at Company A. Upon going to Company B it is clear that if they only knew what your former employer did, they would get more sales, make products faster and cheaper, whatever.

Where some co-workers got themselves into trouble was (a) not disclosing there was a non-complete agreement in the first place and (b) trying to find out how much this knowledge might be worth to their new employer. As in "I might be able to offer some advice on how to do this better for $5000." Yes, I heard about that offer once. It was a while ago and resulted in immediate (same hour) termination of the employee.

I didn't know IBM trade secrets had a shelf life of 365 days. Are the added preservatives healthy? More seriously, with a company the size of IBM... he might as well just take a one year vacation because everyone in IT is a competitor to them in some market or another. This guy will probably do just that too, since the cost of litigation is so expensive. So what IBM has effectively done then is snub Apple, at the expense of this guy's career. How very mature of them.

If he was moving from IBM to Sun or from nVidia to AMD/ATi I would understand that. Please correct me if I am wrong but they are only just in the same business

IBM mostly focus on professional services and stuff that goes in the server room (servers, mainframes, storage etc) while Apple focus mostly on desktops, laptops and digital music. Both companies IMO make great products and provide good services but are mostly in two completly different markets.

Yes NY doesn't allow non-compete agreements but California does and takes precendent in the constitution. The legality of the agreement is not in question, its weather he violated that agreement or not which I dont think he did considering IBM and Apple dont compete with eachother.

I think if a company wants to force someone not to work in their area of expertise for a year then they should be forced to compensate that person for a year. They should match Apple's compensation and benefits and the guy doesn't have to work. That seems fair.

In September, Apple again contacted Papermaster, which led to more meetings with Jobs and others in early October. After he declined a counteroffer from IBM and another, separate offer to "sit out" for a year in exchange for his current base salary, Papermaster told IBM he had made up his mind and was going to Apple.

It depends on the state. I know that in Oregon for example what you said is actually the law and they have to pay a certain % of your wages for an entire year while you are on the non-compete, OR they can choose not to enforce it.

"I think if a company wants to force someone not to work in their area of expertise for a year then they should be forced to compensate that person for a year. They should match Apple's compensation and benefits and the guy doesn't have to work. That seems fair."

In the UK this is referred to as 'Garden leave'. Basically, if the company wants to enforce the non-compete, they have to continue to pay you even while you sit in the garden and watch the grass grow. If they won't pay you not to work then they ha

IBM is concerned about the new iBlade. These blade servers are similar to IBMs, except permanently glued into an apple blade chassis. Just imagine if Papermaster showed them how much more flexible removable blades would be!

They can't seriously believe that their blade server secrets are threatened by iPods...

No, don't let his job title fool you, this guy is a well known leader in the chip design community.
And since Apple recently purchased PA Semi, it looks like Apple is now in direct competition against IBM. And so that guy may seem like he might just be helping Apple make the iPod chip smaller, but his technical know-how and the people he's going to attract, are definitely going to help the new (PA Semi) division of Appl